Key Highlights
- The Digital Chamber filed an amicus brief in the Sixth Circuit supporting Kalshi and the CFTC’s authority over prediction markets.
- The organization argues that states cannot override contracts listed on federally regulated exchanges.
- The brief warns that a ruling against Kalshi could threaten weather, energy, and currency derivatives.
The Digital Chamber has filed an amicus curiae brief in the U.S. Court of Appeals for the Sixth Circuit supporting prediction market platform Kalshi in its legal battle against Tennessee regulators, arguing that states should not be allowed to override federally regulated derivatives markets.
The filing comes in the case KalshiEX LLC v. William Orgel et al., where Tennessee officials are challenging sports-related event contracts offered through Kalshi’s CFTC-regulated exchange. The Digital Chamber contends that the dispute extends far beyond sports prediction markets and could have significant consequences for the broader U.S. financial system.
Digital Chamber defends CFTC’s exclusive authority
At the center of the brief is the argument that Congress granted the Commodity Futures Trading Commission exclusive jurisdiction over contracts traded on federally designated exchanges. The Digital Chamber argues that once a contract is listed on a CFTC-regulated market, oversight should follow the instrument and trading venue rather than the underlying activity referenced by the contract.
“Congress gave the CFTC exclusive jurisdiction over trading on designated contract markets to ensure a single national framework,” the brief states.
According to the organization, allowing states to impose separate restrictions on federally approved contracts would undermine the national regulatory structure established under the Commodity Exchange Act.
Warning against a patchwork of state rules
The trade association warned that permitting individual states to prohibit event contracts could create a fragmented regulatory environment incompatible with modern financial markets.
“Modern market infrastructure can’t function under a patchwork of 50 conflicting state rules,” The Digital Chamber said while announcing the filing.
The brief argues that exchanges, clearinghouses, and market participants rely on a unified federal framework for clearing, settlement, surveillance, and risk management. A state-by-state approach, it says, would create uncertainty for market operators and investors alike.
Case could reach far beyond prediction markets
While the lawsuit focuses on sports event contracts, the Digital Chamber argues that the legal theory advanced by Tennessee could affect a much broader range of federally regulated derivatives.
The brief warns that if states are allowed to prohibit event contracts because they relate to activities regulated under state law, similar challenges could eventually be applied to weather derivatives, energy futures, currency futures, and other financial products overseen by the CFTC.
“If states can prohibit federally listed event contracts because they relate to sports, the same theory could threaten weather derivatives, energy futures, currency futures, and other federally regulated products,” the filing states.
Prediction markets face increasing regulatory scrutiny
The case arrives as prediction markets continue to expand across sports, politics, economics, and real-world events, drawing increased attention from both federal and state regulators.
Several states have argued that sports-related event contracts resemble traditional sports betting and therefore fall under state gaming laws. Prediction market operators, however, maintain that the contracts are federally regulated derivatives subject to CFTC oversight.
The Digital Chamber’s filing supports that position, arguing that a ruling against Kalshi would blur the long-established line between state regulation of gambling and federal regulation of derivatives markets.
Appeals court decision could be landmark
The Sixth Circuit’s eventual decision is expected to become one of the most significant legal rulings for the prediction market industry. Beyond determining Kalshi’s ability to offer event contracts, the case could clarify whether states have the authority to challenge products approved under the federal derivatives framework.
For the digital asset and prediction market industries, the outcome may help define the future relationship between state regulators and federally supervised event markets in the years ahead.
Also read: Kalshi Sues Illinois in Escalating Fight Over Prediction Markets
